supporting the informal economy in Santiago de Chile

The informal economy represents two-thirds of worldwide employment (OECD 2009) and contributes more than 40% of global GDP (Schneider et al. 2010). It is an especially significant feature of urban labour markets in the Global South, having been a persistent phenomenon in all regions, and expanding in the wake of economic growth in Latin America and Asia in recent decades (OECD 2009). Governmental policies toward the informal economy have taken various forms based on several theoretical approaches (Chen et al. 2001, WIEGO 2014). These range from repressive policies that perceive informal entrepreneurship as a drag on economic growth and poverty reduction, to those promoting their legalisation to foster economic development and others encouraging informal workers’ organisation to resist capitalist forms of exploitation. More recently, strongly supportive municipal initiatives have been put in place to increase informal productivity. This study aims to understand the rationality behind, and the impact and limitations of this emerging supportive policy approach aimed at improving the livelihoods of informal entrepreneurs. It analyses these practices using a mixed-methods approach (ethnography complemented with statistical analysis), on the basis of primary data drawn from 97 face-to-face interviews and focus group discussions, together with a randomised questionnaire survey of 906 workers conducted with the collaboration of a team of field assistants across three informal subsectors in Santiago de Chile: waste-pickers, street vendors and home-based enterprises. In light of the evidence, I argue that granting informal entrepreneurs the right to succeed through municipal support effectively promotes the social and economic inclusion of vulnerable populations. Municipal policy support, in the form of training, capitalisation, access to markets and organisation, can be key to speeding up the growth of enterprises otherwise condemned to stagnation or limited expansion. As part and parcel of this argument, I contend that supporting informal entrepreneurs is vital in a situation in which informal entrepreneurship typically becomes a ‘one way street’ in the absence of decent employment alternatives in the lower tiers of the formal economy. My thesis also suggests that understanding formal-informal linkages can benefit from a selective amalgamation of divergent theoretical approaches, as these two markets operate both in integration (as per structuralist and legalist perspectives), a structure commonly described as exploitative, and separately in a parallel network of informal enterprises (as per dualist perspectives), described as a fairer alternative for informal enterprises to trade products. In light of my findings, I offer concrete suggestions for further improving the nature of municipal policies and the necessity for higher-level supportive approaches to fully unlock the informal economy’s potential.